The fight over remote working will heat up in 2024

When covid-19 forced office workers to toil from their spare rooms and kitchen tables, it triggered the biggest shift in professional life for decades. And, as with any big shift, the consequences are still working their way through corporate hierarchies and the financial system. In 2024 reality will start to set in, for workers, bosses and landlords.

Managers and their employees do not quite see eye to eye on the vexed question of where work should be done. According to a survey by WFH Research, a group of academics, full-time workers with at least a secondary education in America, Britain and Canada work, on average, a day and a half a week from home. And, on average, they want to double their time doing so. Employers, however, have different ideas. Everyone from Goldman Sachs, a Wall Street giant, to Zoom, of video-calling fame, is asking its reluctant workers to show up to the office more often.

No one is expecting, or even looking for, a return to five days a week. The most likely outcome is that bosses and workers meet in the middle, with a little less work done remotely than employees would prefer. But a lot depends on whether rising interest rates eventually weaken the economy. If unemployment starts rising and workers are no longer in short supply, bosses will drive a harder bargain.

The shift to remote work has so far had a curiously muted effect on the commercial-property industry. Offices are certainly less busy than they used to be: according to Kastle, a firm that operates swipe-in systems for offices, occupancy in America is roughly half what it was before the pandemic. Yet the long duration of office leases means that vacancy rates, though rising, have been relatively low. Goldman Sachs reckons that 12% of leases will come up for renewal in 2024, more than twice as many as in 2023.

The bank reckons that remote working could contribute to an extra 46m square feet (4.3m square metres) of office space lying vacant in America—equivalent to all the floor space built in 2022. Whereas swish offices that comply with tightening environmental standards will stay in high demand, the offices most likely to stay empty are in older buildings.

None of this is welcome news for landlords. Their refinancing costs have gone up as well, as interest rates have risen. In America most commercial-property loans are owed to smaller lenders, which are especially under strain after the collapse of Silicon Valley Bank in March 2023. And financing costs for less desirable office space are likely to be higher still. The yields on commercial mortgage-backed securities, for instance, are higher for low-quality offices than they are for “prime” properties.

Expect to see more of these buildings being sold at a discount, so that they can be refurbished or demolished. Those that have sufficient light and the right plumbing may be turned into homes. Though this is unlikely to be financially viable for most unwanted offices, the number of conversions in places like London and New York is growing. In Manhattan, 25 Water Street, which used to house a newspaper and a bank, is being converted into a residential block with 1,300 flats, a spa, a swimming pool—and a co-working space. The pandemic may be over, but in 2024 the remote-work revolution will continue to change how and where people work and play. ■

Rachana Shanbhogue, Business affairs editor, The Economist